CLOSING COSTS? WHAT THE HECK?

ruggedgrp.com

What?! i need more money than just for my down payment? I hear that frequently. Yes. Yes you do. The money you need to purchase a home is for two different things: down payment and closing costs. Closing costs are the fees that you are required to pay the lender for services that are needed to close the transaction. What services you might ask. Here are the basic items that constitute closing costs:

Underwriting and processing - lender required

Appraisal and credit report - lender required

Tax transcript fees -lender required

Title Fees-which include a title exam, closing fee, and issuance of an owner's policy -required to be sure the title can be passed free and clear to you, as well as insure you in the case of a claim against the title in the future.

Recording Fees-required by the county of the property and the lender

There is also a subset of costs known as pre-paids. 12 months of home owner's insurance paid in full, interest on the loan to the end of the month, and a cushion for taxes and insurance known as your "escrow account" so that there will be enough money to pay these items a year from now when they come due.

These are the basic fees. Lending fees normally run $1900-$2000. The pre-paids depend totally on the cost of your taxes and home owner's insurance. Title fees are minimally going to run in the $500-$700 range depending on the size of the loan.

In addition there can be others such as termite inspection fees, well and septic test fees and if you choose to "buy down" your interest rate to a lower rate there is a cost.

The good news is you can often ask the seller to pay part or all of the closing costs. Up to 3% of the purchase price on conventional mortgages or up to 6% on government loans. In addition on VA loans there are some costs - $1000-$1200 that the veteran is not allowed to pay, so the seller normally does pay them or in some cases the lender does.

And there are two 100% loan types out there VA and USDA as well as the Indiana Housing down payment assistance which do not require a down payment, so monies saved can go for closing costs alone, or partial closing costs with seller concessions.

While it is possible to obtain mortgage financing without much out of pocket expense, I think it would not be entirely truthful to give someone the idea that they can get into a home with absolutely no out of pocket expense. Between inspections and earnest money I would plan for a minimum of $1000 out of pocket if you qualify for one of the no money down programs.

What Does Equity Mean to You?

blog.smarthomeequity.com

Today I want to talk a bit about home equity. For many new and would be buyers this term may be unfamiliar. Home equity can equal savings-savings you don't even think about. To keep it simple, equity in your home is the difference between what the house is worth and what you owe on it.

Let's say you buy a house for $100,000. You put 5% down ($5000). This would mean your equity is $5000 the day you close on the house...unless...your house appraises for $115,000 during the sale process. Then your equity is $$20,000; the difference between what the house is worth and what you owe.
Well that's nice, you say. No one wants to pay more than a house is worth, but what does that mean to me? Let's attack that question in a couple different ways. If you are a smart buyer you will purchase a home in a neighborhood in which there is demand. Perhaps it is because of the local schools, or maybe the physical characteristics of the lots in the neighborhood. Perhaps the location is close to shopping and amenities. It is financially advantageous to purchase one of the lower priced homes in an area that is growing in demand and value.

Since Americans only remain in a home on average 5-7 years. chances are that you will wish to sell that property sooner rather than later. Job transfers, growing families, more income, all contribute to the reasons people put their homes on the market. If you have bought into a neighborhood that has increased demand, your home should be worth more than what you paid for it, therefore, your value is up. You have been making payments all this time, so what you owe is down. Meaning you will have more money to put down on your next home or stash away in savings if you aren't buying again right away.

Perhaps you have no intention of moving, but your family has grown over the past seven or eight years and you need more space. Your home that you paid $150,000 for has increased in value to $175,000. Chances are there is some cash you could take out of the house between what you owe and what it is worth refinancing or using a home equity loan to add on or improve the home.

At Hallmark we have a loan that does just that, our Toolbox loan. Using the toolbox you can access the equity in your home up to 95% of the value for improvements. This product can even be used on a purchase to update a home you wish to buy assuming the home is worth enough to support the loan. Equity can be used for other things as well: to finance a portion of retirement if you sell once you retire, to access to send a child to college, or in some cases it might make sense to pay off debt.

So the next time someone is talking about equity in a home-what they a

Getting In Your Own Way

ninchanese.com

We all want a smooth mortgage process.If you ask around I am sure you will find multiple stories of mortgage processing horrors. There are some doozies out there. I know I hear them. However, there are things you can do to keep what began as a positive experience from turning into a nightmare. So take note-ignore these items at your peril.

1) Discuss loan options with your lender. Do your comparative shopping up front before you find a house. Decide where you want to apply for your loan. Jumping ship with the pressure of the clock running up to a closing date is not recommended. If you exceed the expiration on your contract date there is nothing but the seller's good will that will extend the contract. Think about it-maybe he has a better offer if yours falls through.

2) Don't forget to tell your lender about child support payments, loans not on your credit report, upcoming job changes or litigation that may be occurring. These can affect the outcome of the approval.

3) Give your lender the email address you check most frequently. If you don't use your email-say so. Most lenders communicate using email unless informed not to do so. Many documents are time sensitive and will be emailed unless instructed otherwise.

4) If you take a vacation while your loan is processing leave contact information. Failure to be able to reach you can cause delays.

5) Offer to supply documentation for your file prior to writing an offer. A loan file can't be submitted without all the appropriate financial documentation. We don't ask for documents because we like fat files-we ask for what we need to underwrite the file. You can question what we request-but generally there is no court of appeals. Please keep in mind that a lot of what is needed is federally mandated.

6) The Federal Government requires you to have three days to review your final fees prior to closing. This time table can't be moved up. Be aware that closings can't happen on the fly.

7) Do not change the terms of your contract-such as ask for closing costs after submission or decide to bring more money for the down payment to closing without telling your lender. We won't know if you don't tell us so the changes won't be made to the loan.

8) Tell your lender as soon as you are aware that there is an issue with your whole house inspection or if there isn't. Sometimes the lender, as a courtesy to you, will not order the appraisal until they hear that no deal killers came out of the inspection.

9) Don't anticipate that the appraiser will value your home for more than the sale price. He/she might, but the job is to support the sale price, not give you instant equity.

10) Be sure to get all requested documents while your loan is in process to your lender in a timely manner. Most underwriters and loan processors work on an assembly line type basis. If you miss your turn, you don't get moved to the front when you get your items in. You have to wait until your turn comes around again. So slow response only slows your loan down.
Typically, if we have what we need when we submit the loan file we can close your loan within 30 days. Items we don't control are the appraisal results, title concerns, and how fast you respond. If everyone works together we can deliver a smooth, on time closing.